Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Cash Flow Statement

Question:

Which statement is true regarding investing activities in a cash flow statement?

Options:

They encompass short-term operational expenses

They represent current income generation

They focus on long-term asset acquisitions and disposals

They emphasize cash flows from financing activities

Correct Answer:

They focus on long-term asset acquisitions and disposals

Explanation:

Investing activities in a cash flow statement primarily center around long-term asset acquisitions and disposals. These activities involve the acquisition, sale, or disposal of non-current assets, also known as capital assets or long-term investments, which are intended to contribute to the company's growth and generate future income and cash flows. Investing activities are distinct from short-term operational expenses, which fall under operating activities. Investing activities are concerned with decisions related to the company's investments in assets such as property, plant, equipment, intangibles, and other similar resources. These activities generally have a more long-term impact on the company's financial position and future earnings.